Do not select an AI firm by the label local, nearshore, or offshore. Select it by where the people, data, decisions, and accountability actually sit. A local provider may reduce discovery and contracting friction; nearshore delivery can combine working-hour overlap with a broader talent market; offshore delivery can add scale and follow-the-sun capacity; a distributed team can assemble scarce specialists. None wins by default. The right model clears nonnegotiable risk gates and produces the best outcome, decision speed, resilience, and total economics for the use case.
Before comparing rates, require a verifiable location register: contracting entity, named people and allocation, work and support countries, storage and processing locations, subcontractors, privileged access, shared decision hours, and the party accountable when something fails. A headquarters address is not a delivery model.
The AI Delivery Location Fit-8: 32 points
Score each dimension from zero to four: zero is unknown or incompatible; one is a promise without a mechanism; two is partially designed; three is operable with controllable gaps; four is reproducible evidence with an owner and contingency. As an illustrative threshold, require 24 of 32, no zero, and at least three for data, security, continuity, and accountability. Set weights before proposals are opened.
- Context and outcome — access to users and executives, process understanding, language, market knowledge, and feedback speed.
- Collaboration and decision latency — useful working-hour overlap, ceremonies, incidents, dependencies, and time to clear blockers.
- Team and capacity — named people, seniority, allocation, turnover, backups, specialists, and approval of substitutions.
- Data and jurisdictions — data inventory, purpose, processing location, transfers, retention, remote access, and deletion.
- Security and supply chain — identity, device, environment, privilege, logs, third parties, secure development, and incident response.
- Contract and accountability — responsible entity, governing law, audit, ownership, acceptance, remedies, insurance, and transition support.
- Operational resilience — coverage, holidays, infrastructure, geographic concentration, continuity, recovery, and tested exit.
- Total economics — rates, taxes, currency, client management, travel, rework, cloud, models, human review, and delay cost.
Compare four models without stereotypes
- Local — supports frequent workshops, domestic contracting, and market context; scarce specialties or price may constrain the model.
- Nearshore — offers useful time-zone overlap and regional talent; cross-border contracting, data flows, and entity risk still require control.
- Offshore — can provide scale, specialist depth, and sequential coverage; weak design increases handoff, asynchronous decision, and access-control costs.
- Distributed — can combine best-fit specialists and reduce single-location concentration; it needs common standards, one integrating owner, and stronger documentation.
Do not use country as a proxy for quality. Evaluate the actual delivery cell and the system that governs it. An opaque local firm may carry more risk than a transparent international team. A distributed team can collaborate better than co-located groups when decision rights, environments, evaluation assets, and records are designed well.
Apply five kill criteria before scoring
- The model cannot meet mandatory data, access, sector, customer, or export-control constraints.
- The contracting entity will not stand behind delivery staff and subcontractors.
- Shared hours are insufficient for material decisions and critical incidents.
- Critical roles lack named people, backups, or buyer approval for substitution.
- The provider cannot demonstrate access revocation, continuity, and transfer of project assets.
For U.S. buyers, map every remote-access and processing location instead of assuming that a U.S. contract means U.S.-only delivery. Identify sector, customer, government, export, sanctions, confidentiality, and data obligations before inviting proposals. Requirements differ by context; do not insert a blanket residency clause that blocks legitimate delivery without reducing a defined risk.
Require six comparable artifacts
- Delivery register by function, person, country, time zone, allocation, and backup.
- Data and access map by environment, system, purpose, jurisdiction, and subcontractor.
- Decision RACI with overlap windows, alternates, and escalation.
- Delivery plan exposing handoffs, dependencies, holidays, and critical path.
- Whole-life cost model covering currency, taxes, travel, management, cloud, and human review.
- Continuity and exit plan covering repositories, documentation, credentials, knowledge, and a transition test.
Test the location model with an adversarial handoff
Run a 90-minute session with the named team. Introduce an urgent requirement change, access that must be revoked, a quality failure discovered outside shared hours, and an unavailable specialist. Ask the provider to triage, decide, document, communicate, recover, and replan. Score detect-to-decision time, context loss, ownership clarity, access evidence, and handoff quality—not presentation polish.
Use a hybrid model when the choice is not binary
Many programs benefit from product, risk, and business leadership close to the buyer; a nearshore or distributed engineering and data cell; and remote specialists on demand. Hybrid only reduces risk when one party integrates delivery through one backlog, environment, evaluation set, and operating cadence. Otherwise the buyer absorbs the coordination cost among vendors and locations.
Red flags before hiring
- The proposal markets a location but hides where named people work.
- Rate-card savings exclude client coordination, rework, and delay.
- Data, support, or subcontractors may move without notice.
- Overlap is narrow and nobody has decision authority outside it.
- Critical delivery depends on one person or city.
- The sales team is local, while the delivery team never joins selection.
- Documentation and repositories remain inside provider-controlled environments.
Connect location to the rest of provider selection
Use https://makinai.co/insights/en/boutique-ai-firm-global-consultancy-systems-integrator to choose the provider archetype, https://makinai.co/insights/en/security-due-diligence-ai-services-company to inspect access and third parties, https://makinai.co/insights/en/internal-team-hire-govern-ai-services-company to assign buyer owners, and https://makinai.co/insights/en/what-to-include-ai-services-contract-sow to turn the design into verifiable obligations.
When to involve MAKINAI
MAKINAI can compare delivery models, normalize proposals, and test how finalist teams collaborate, protect data, and respond to failure before signature. Explore https://makinai.co/services/en/ai-strategy-transformation-consulting. Finalize the model with legal, privacy, security, procurement, finance, tax, labor, and export specialists relevant to the participating jurisdictions.